Unstoppable Surge: Gold Loan Demand Strong Despite Cash Disbursement Curbs, CRISIL Reports | Finance News

Gold Loan NBFCs Thrive Despite RBI Cash Disbursement Curbs: CRISIL Report

Gold loan non-banking financial companies (NBFCs) experienced significant growth in June 2024, even as the Reserve Bank of India (RBI) imposed cash disbursement restrictions, a CRISIL report reveals. This growth is buoyed by favorable gold prices and strong risk management practices.

Ajit Velonie, Senior Director at CRISIL Ratings, highlighted an approximate 12% rise in June’s disbursements compared to the previous quarter’s average, with a notable 23% growth excluding one large player. These NBFCs effectively navigated the RBI’s May 2024 directive, which mandated non-cash disbursements for loans exceeding Rs 20,000.

The transition to digital channels was smooth, with only a minor increase in turnaround time, helping NBFCs maintain competitiveness over banks. However, CRISIL cautioned that a prolonged decline in gold prices could impact the sector. NBFCs must closely monitor loan-to-value (LTV) ratios and conduct timely auctions to mitigate risks.

Despite the drop in gold prices following a reduction in customs duty in the Union Budget, the impact on gold-loan NBFCs has been minimal. According to CRISIL’s director Malvika Bhotika, this resilience is due to a low LTV range of 60-65% as of June 30, 2024, and a focus on periodic interest collection.

These measures indicate that gold loan NBFCs are well-positioned to manage gold price volatility and continue their robust performance despite regulatory changes.

Original Story https://www.business-standard.com/finance/news/gold-loan-demand-stays-strong-despite-cash-disbursement-curbs-crisil-124081601550_1.html
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